2 FTSE 100 stocks with 5% dividends I’d buy today

I would consider Vodafone Group’s (LSE: VOD) recent retracement from 10-month highs as a terrific dip-buying opportunity for those hunting exceptional dividend stocks.

The telecoms titan — which recently dropped as the diplomatic standoff in the Middle East cast concerns over the outlook for its operations in Qatar — has not had the best of it more recently as adverse currency movements, allied with the impact of regulatory changes in Europe, have dented the top line.

These pressures caused revenues to dip 4.4% in the 12 months to March 2017, to €47.6bn. And with Vodafone also nursing a huge writedown…

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I would consider Vodafone Group‘s (LSE: VOD) recent retracement from 10-month highs as a terrific dip-buying opportunity for those hunting exceptional dividend stocks.

The telecoms titan — which recently dropped as the diplomatic standoff in the Middle East cast concerns over the outlook for its operations in Qatar — has not had the best of it more recently as adverse currency movements, allied with the impact of regulatory changes in Europe, have dented the top line.

These pressures caused revenues to dip 4.4% in the 12 months to March 2017, to €47.6bn. And with Vodafone also nursing a huge writedown on its Indian operations, the company was forced to swallow an eye-watering €6.1bn loss, up 18.7% year-on-year.

Cash machine

Despite these recent troubles, I believe Vodafone’s long-term investment outlook remains robust. The fruits of its multibillion-pound Project Spring organic investment drive to bolster its 3G and 4G infrastructure lays the base for strong sales growth around the globe, as does ongoing M&A activity like the recently-announced merger with Malta’s Melita.

The City also expects earnings to continue chugging higher at Vodafone. A 4% advance is pencilled-in for the period to March 2018, and profits are expected to rev higher thereafter — an 18% rise is anticipated for fiscal 2019.

And these projections are anticipated to support further meaty dividends. Predicted payouts of 14 euro cents in 2018 and 14.1 cents per share in 2019 create monstrous yields of 5.5% and 5.6% (trouncing the FTSE 100 forward average of 3.5%).

Many investors may be concerned that predicted rewards outstrip earnings of 8.4 cents for this year and 9.8 cents for next year. But I am convinced Vodafone’s proven qualities as a colossal cash machine should allow it to meet these dynamite projections. Free cash flow registered at €4.1bn in the last fiscal year, and Vodafone expects to bump this to €5bn in the present period.

Special delivery

Although the number crunchers expect earnings to duck 10% in the current year, reflecting the impact of Brexit-related chaos on business investment, Britain’s oldest letter carrier is still expected to hike the dividend from 23p per share in the year to March 2017 to 23.6p in the present period.

As a result, Royal Mail sports a bumper dividend of 5.4%. And the good news does not cease there as predictions of a 24.6p reward have been made for fiscal 2019, shoving the yield to 5.7%.

The Square Mile expects earnings to get back in positive territory from next year, and a 3% rebound is currently expected. And looking further down the line, I expect the still-expanding e-commerce sector — allied with the surging success of its GLS operations in Europe — to keep the bottom line, and consequently dividends, moving higher.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.